China’s Fintech Ecosystem Update: A New Era?
Summer 2024 China Internet Earnings Report
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China’s financial technology ecosystem has been out of sight and out of mind for many investors and analysts ever since Ant Financial’s potential blockbuster IPO was postponed at the end of 2020. We believe it could be time to revisit the dynamic industry. After having grappled with changes in regulation and macroeconomic headwinds, many consumer finance and micro-lending platforms have adjusted their business models to meet the moment and capitalize on new opportunities, which we believe could ring in a new era of sustainable growth.
In this edition’s theme highlight, we look at two innovative online lenders: KWEB holdings Lufax and Qifu Technology.
China Internet Recent Highlights:
- OpenAI has exited China’s vast market, which is a significant catalyst for homegrown artificial intelligence (AI) players such as KWEB holdings Baidu, which has already offered free services to AI startups using its Ernie Bot large language model, and Alibaba.1
- E-commerce giants Alibaba and JD.com have each issued US dollar-denominated convertible bonds. We believe these issuances will help both companies finance buybacks with US dollars, borrow at a lower interest rate thanks to expectations for the stock to rise, and indicate to the market confidence in their growth and financial situation.
- Alibaba’s Hong Kong shares could be added to Southbound Stock Connect, the mutual market access program that allows Mainland investors to trade Hong Kong stocks, as soon as August, according to management. To quantify the significance of this inclusion, Tencent and Meituan have 10% and 13% of their shares currently owned by Mainland investors. Assuming a similar Mainland ownership level for Alibaba, this could lead to inflows of over $100 million.2
China Internet Sector Earnings Report Contents:
- China Internet Sector recent Highlights
- Subsector Analysis
- Theme Highlight – China’s Fintech Ecosystem Update: A New Era?
- KWEB Top 10 Holdings Earnings Update
- Bloomberg News. “How OpenAI’s Decision Not to Operate in China Will Reshape the Chinese AI Scene,” Time. June 26, 2024.
- Data from Hong Kong Exchange & Clearing as of 6/30/2024.
For KWEB standard performance, top 10 holdings, risks, and other fund information, please click here.
